Opening Bell: 05.21.13


Apple’s Web of Tax Shelters Saved It Billions, Panel Finds (NYT)
Thanks to what lawmakers called “gimmicks” and “schemes,” Apple was able to largely sidestep taxes on tens of billions of dollars it earned outside the United States in recent years. Last year, international operations accounted for 61 percent of Apple’s total revenue. ... “There is a technical term economists like to use for behavior like this,” said Edward Kleinbard, a law professor at the University of Southern California in Los Angeles and a former staff director at the Congressional Joint Committee on Taxation. “Unbelievable chutzpah.”

JPMorgan investors on edge over vote on Dimon; what if they win? (Reuters)
Investors say that while Dimon, 57, may need more oversight after the bank posted $6.2 billion in losses from failed derivative trades last year, they do not want him to quit. Among big bank CEOs, Dimon ranks first for stock returns and has been praised for leading the bank through the financial crisis with no quarterly losses and a strong balance sheet. If Dimon were to leave, the bank's shares could fall as much as 10 percent and erase about $20 billion of market value, according to Mike Mayo, a bank analyst with brokerage CLSA. JPMorgan also has no ready replacement for Dimon, Mayo wrote in a research note, adding that the two lieutenants best positioned to succeed him - Matt Zames, 42, and Mike Cavanagh, 47 - seem to be about three years short of being ready for the job.

SAC Capital Aims to Stem Withdrawal Requests (DealBook)
“I’m very comfortable and confident having my money with him,” said Ed Butowsky, managing partner of Chapwood Investments in Dallas, a firm that invests client money in SAC. “All I know is that the returns are coming in nice, and my clients are happy.”

Funds Get Active Over Director Pay (WSJ)
Current pay structures don't give directors enough of a stake in making sure the company does well, and boards need to be more creative about tying their compensation to performance, said John Wakeman, a vice president and portfolio manager at mutual-fund giant T. Rowe Price Group Inc. "If bad people are going to be on these boards, we've got to stop it," said Mr. Wakeman. "We owe it to our fund holders."

Buffett Jets Chief Says U.S. Leads Private-Flight Rebound (Bloomberg)
The U.S. is leading a recovery in demand for private flights while Europe remains weighed down by economic weakness, the head of billionaire Warren Buffett’s jet-management company said. “The U.S. from our perspective is coming back and doing relatively well,” Jordan Hansell, chief executive officer of Berkshire Hathaway Inc.’s NetJets, said by phone yesterday from Geneva, where he is attending the European Business Aviation Convention & Exhibition. “Europe has remained difficult.”

Poor li’l rich kids: Posh schools scold parents who send nannies (NYP)
Wealthy New Yorkers are shunning their parental duties — choosing instead to send nannies to their children’s private schools to take part in everything from “safety patrol” to accompanying the kids on their entrance interviews. ... “Now the schools are getting angry — and other parents are getting angry. They don’t want to work the school bake sale with someone’s paid employee,” Uhry said. ... But one Upper East Side mom whose daughter attends The Birch Wathen Lenox School sniffed that she pays the school $40,000 a year — and can’t be bothered with such menial duties. “These schools are exorbitantly expensive, they hit you up for school fees, donations, and then they want your time?” she huffed. “I have three kids at three different schools. If I can send my nanny, I’m happy to do it.”
Former Horace Mann admissions director Dana Haddad said schools now accept nannies at admissions interviews because kids tend to perform better in front of them. “When I was a director of admissions and children would act up, I would tell parents, ‘Don’t worry, send them back with the nanny,’ ” said Haddad.

Europe's Recession Sparks Grass-Roots Political Push (WSJ)
The backlash has taken many forms. A group called Record Your City Council Meeting makes video recordings of public meetings and posts them online, risking fines where such reporting is banned. Activists secured more than 1.4 million signatures for a relaxation of Spain's strict home-foreclosure laws, prompting Parliament to reconsider them. "People are becoming aware that they need to participate in institutions to make them more democratic," said Mario Cuellar, a member of the video-recording group. "We need to reclaim politics from the chorizos," using a slang term for thieves.

Thousands of French Households Taxed Over 100% (CNBC)
More than 8,000 French households' tax bills topped 100 percent of their income in 2012, according to a French newspaper report. ... The paper said this was due to a one-off levy imposed on the 2011 incomes of households with assets of more than 1.3 million euros ($1.67 million). The surcharge was introduced by socialist President Francois Hollande in an attempt to offset the cost of a rebate scheme and taxation cap introduced by former President Nikolas Sarkozy, the paper added.

Qatar snaps up stakes in key lenders (FT)
Qatar is launching another multi-billion dollar push into the banking sector, buying fresh stakes in Russia’s VTB and Germany’s Deutsche Bank. The Qatar Investment Authority, the principal fund responsible for allocating the gas-rich emirate’s vast wealth, is poised this week to invest up to $1bn as part of a $3.2bn capital raising by VTB, Russia’s second-biggest bank, according to people close to the transaction.

Blackstone Leads Latest Chinese Privatization Bid
A fund run by the Blackstone Group is leading a $662.3 million bid for a technology outsourcing firm based in China, the latest example of a modest boom among buyout shops backing the privatization of Chinese companies listed in the United States. A consortium backed by a private equity fund of Blackstone, the U.S. investment firm, and including the Chinese company’s management said Monday it would offer $7.50 per share to acquire Pactera Technology International, which is based in Beijing and listed on the Nasdaq.

Bank Mergers in U.S. Seen Less Likely With Sellers Holding Out (Bloomberg)
“The regulatory risk of getting a deal nixed at the 11th hour is certainly higher than a year ago,” Brian Stephens, head of KPMG’s banking and capital markets practice, said in a phone interview. Leaders of smaller lenders that may sell themselves are saying, “I’ve gotten through the worst of times, and I see better times coming, so why do a deal now?”

Common Gnomes Pop Up at Rarefied Flower Show, to Horror of Many (NYT)
Some exhibitors went proud and loud, putting gnomes in places they would not be missed, like in the middle of the grass. Others seemed to feel that gnomes may be fine for other people, but certainly not any people they know, or want to know. One renowned landscape architect, Robert Myers, hid a gnome in a tree in his display, lost his nerve and took it out again before the judges could see it. “I don’t know where he went,” Mr. Myers said of his erstwhile gnome.


Opening Bell: 01.23.13

Greece Charges Statisticians Over Size of Deficit (FT) Greece has brought criminal charges against the official responsible for measuring the country's debt, thereby calling into question the validity of its 172 billion euros second bailout by the EU and International Monetary Fund. Andreas Georgiou, head of the independent statistical agency Elstat, and two senior officials are accused of undermining the country's "national interests" by inflating the 2009 budget deficit figure used as the benchmark for successive austerity packages. The three statistical experts face criminal charges of making false statements and corrupt practices, a judicial official said, adding that if found guilty they could serve prison terms of five to 10 years. They have denied any wrongdoing. Spain's Recession Deepens (WSJ) Spain's central bank said a recession in the euro zone's fourth-largest economy deepened slightly in the final quarter of last year, but it said austerity cuts are bringing the country's runaway budget deficit under control. Obama-Bashing Swapped for Pragmatism at Davos (Bloomberg) “We have to move on in our society,” Blackstone found Stephen Schwarzman said today in an interview in Davos with Bloomberg Television’s Erik Schatzker. “I like President Obama as a person, and he’s well- intentioned.” Schwarzman, 65, warned in Davos in 2010 that banks could restrict lending because “their entire world is being shaken and they’re being attacked personally.” Later that year, at a nonprofit group meeting, he likened Obama’s tax proposals to Hitler’s invasion of Poland. Third Point LLC CEO Daniel Loeb, who in 2010 compared Wall Street’s Obama supporters to “battered wives,” will help lead a Jan. 25 Davos dinner discussion, “Can Capitalism Evolve?” Schwarzman apologized in 2010 for his comparison of Obama’s effort to double taxes on private-equity income to the invasion of Poland. He said the analogy was inappropriate and that the administration’s need to work with business “is still of very serious concern.” JPMorgan's Jamie Dimon Apologizes, Attacks (WSJ) James Dimon of J.P. Morgan Chase was prepared in Davos to apologize for the more than $6 billion of trading losses racked up by the so-called London Whale, but he certainly wasn’t prepared to abase himself...Min Zhu, deputy managing director of the International Monetary Fund, reeled off a string of statistics to show that the industry certainly hadn’t cleaned up its act since the crisis, and Paul Singer, principal of hedge fund Elliott Associates, was also keen to lambaste big banks, including Mr. Dimon’s. The two had some testy exchanges and the body language indicated that Messrs. Singer and Dimon have exchanged fire quite a few times previously. Still, Mr. Dimon gave us good as he got. He kicked off with repeating his apology to shareholders for the London Whale trading losses, which led to his own bonus being slashed, saying, “If you’re a shareholder of mine, I apologize deeply.” Having offered this apology he then went on the offense. He pointed out that his bank lent money to a whole host of worthy organizations such as schools, hospitals, governments, and Italian and Spanish corporates and governments. And he also had some snappy comebacks. Elliott’s Singer said that the global banks are “too big, too leveraged, too opaque,” which left Mr. Dimon with an easy retort about how could a hedge fund possibly criticize a bank about being opaque? “Our [securities filing] 10K is 400 pages long,” Mr. Dimon said. “What would you like to know?” Geithner Exit Next Friday (AFP) US Treasury Secretary Timothy Geithner, who steered the administration of President Obama through the financial crisis, will step down from his post Friday, a source told Agence France Presse yesterday. Golfer Mickelson recants tax rant (NYP) Mickelson — who hinted he might move from his home state of California to escape higher taxes — said he regretted his public rant on the issue after setting off a political firestorm. “Finances and taxes are a personal matter and I should not have made my opinions on them public,” according to a statement from Mickelson, who plans to elaborate today at the Farmers Insurance Open. “I apologize to those I have upset or insulted and assure you I intend to not let it happen again.” Senator Lautenberg Suggests Spanking In Store For Mayor Cory Booker (CI via DI) "I have four children, I love each one of them. I can't tell you that one of them wasn't occasionally disrespectful, so I gave them a spanking and everything was OK," Lautenberg said with a smile in his first public comments since Booker announced he was considering a run for Senate. Banker's Latest Bet: Teamwork on Bonds (WSJ) Texas banking tycoon Andrew Beal is known for making unconventional moves, including gambling on high-stakes poker and a self-financed plan to launch rockets into space. His latest gambit: an attempt to wring money from giant banks by banding together aggrieved bondholders. Mr. Beal's CXA Corp. ran a pair of advertisements late last year, one appearing in The Wall Street Journal. The ads listed an alphabet soup of residential mortgage-backed securities held by CXA and asked those with positions in the same securities to join the company in investigating possible infractions by banks that sold the debt. If the groups can prove the mortgages that underlie the bonds were approved through shoddy underwriting, they could be entitled to compensation—CXA's payday alone could be tens of millions of dollars. Firms Keep Stockpiles Of 'Foreign' Cash In US (WSJ) Some companies, including Internet giant Google, software maker Microsoft, and data-storage specialist EMC Corp, keep more than three-quarters of the cash owned by their foreign subsidiaries at U.S. banks, held in U.S. dollars or parked in U.S. government and corporate securities, according to people familiar with the companies' cash positions. In the eyes of the law, the Internal Revenue Service and company executives, however, this money is overseas. As long as it doesn't flow back to the U.S. parent company, the U.S. doesn't tax it. And as long as it sits in U.S. bank accounts or in U.S. Treasurys, it is safer than if it were plowed into potentially risky foreign investments. SEC Reins In Ratings Firm (WSJ) The U.S. Securities and Exchange Commission barred Egan-Jones Ratings Co. from issuing ratings on certain bonds, an unprecedented step by the regulator and a setback for a small credit-rating firm with a history of courting controversy. The SEC said Tuesday that Egan-Jones couldn't officially rate bonds issued by countries, U.S. states and local governments, or securities backed by assets such as mortgages, for at least the next 18 months. The ban was part of an agreement the SEC reached with Egan-Jones and its president, Sean Egan, to settle charges that they filed inaccurate documents with the regulator in 2008. The SEC alleged that Egan-Jones misled investors about its expertise, and that Mr. Egan caused the firm to violate conflict-of-interest provisions. Lindenhurst dentist busted after reporting to work reeking of booze and drilling teeth while allegedly drunk (NYDN) Dr. Robert Garelick was hauled out of his Lindenhurst office in handcuffs Monday after his dental hygienist smelled booze on his breath and caught him administering Novocain to the wrong side of a patient’s mouth. “I observed Dr. Garelick looking for cavities in the right side of the patient’s mouth, but the cavities were in the left side,” hygienist Kimberly Curtis told police in a written statement. “I pointed this out to the doctor and that’s when he ordered more Novocain for the patient,” Curtis told cops. “So now, he basically numbed the whole patient’s mouth.” After noticing Garelick’s wobbly behavior Monday, Curtis texted co-worker Dina Fara, who called 911. Curtis said she sent the message after Garelick used a drill to treat another patient who had a chipped tooth. “He was filing the tooth down,” Curtis said. “When you’re using that drill, you have to be very careful and have a steady hand.” She said that just before Garelick treated the chipped tooth, he slipped into his office. “I noticed that he was drinking from a white and purple squeeze bottle,” Curtis said. “At first I didn’t think anything was wrong,” Curtis said. “But right after, he took a drink from that bottle, he got up and walked past me. When he did this I smelled a strong odor of alcohol.” The dentist initially claimed he only had a couple of beers with pizza during lunch Monday, according to Suffolk County cops. But Garelick, who was charged with misdemeanor reckless endangerment, later confessed to his drunken dentistry while being taken to a police precinct in the back of squad car. “I never had any beers with my pizza. I’ve been sipping at that bottle all along today,” he told police, referring to his squeeze bottle filled with vodka, according to a criminal complaint.

Opening Bell: 4.29.15

SEC to propose new rules re: executive pay; Elizabeth Warren gains a friend in fight to curb bailouts; Twitter CEO's no good very bad day; "Baseball Coach Suspended After Forcing Players To Spit In His Face"; and more.